I am drawing a complete blank on where I should record the payments to partners from income received. I am in the process of doing the partnership return and I am trying to reconcile the capital accounts and it is not working. I originally posted the distributions to the capital accounts but that puts the capital accounts into a debit balance - obviously this is not right.

obviously this is not right.!!

Why is it not right ??

Capital Accounts can finish up in DEBIT .
They are biting more of the cherry. than there is to bite.
The Capital Accounts are rendered into Deficiency.
There is NO limited liability in Partnerships.

ROLCOM that is Rude...

Poster came here to ask a question because he/she was not sure. You don't have to treat someone like that, just politely give the answer... Maybe put some thought and or compassion into your answers.

And yes the answer is the capital account can be negative (debt) if the owner takes more out of the business than he/she as put in. But you’re not looking at all the factors here.

AMMO415,

Is the partner permanently taking this money out of the business? If it is not permanent you should post the withdrawals to a drawings account.

Also it sounds like you haven’t posted the income to the partners account yet or their capital account would not be negative. If the income was received what account is it currently sitting in now? Only way the capital could be negative in this instance is if partner took out more than the income he was due, which is probably a violation of the partnership agreement.

Feel free to come back with more questions.